Commercial Quarterly Examiner – industrial market update Q2 2026

In the three months to the end of March, Warehousing output, a measure of the demand for logistics space along with online retail sales, manufacturing output and imports, grew by 0.7% and by 5.2% year-on-year.

Twelve months earlier in March 2025 the y-on-y rate of growth was 3.3%. This metric suggests that occupier demand for logistics remains robust.

There is little new pressure on logistics and industrial take-up from online retail. UK internet retail penetration peaked at 37.2% of all retailing excluding fuel, in February 2021 during the third Covid lockdown. It has now entered a mature, slow-growth phase, stabilising at around 27–30%. At the end of Q2 internet sales as a proportion of all retailing increased by 50 bps from Q1 to 29.4%.

Occupational view

• Availability continues to rise across much of the UK logistics market, while take-up remains below cyclical highs, pointing to a softer occupational backdrop despite pockets of resilient demand.
• Rental value growth remains positive but is moderating, and the shrinking development pipeline should help limit future supply pressure in prime logistics locations.

Since the end of Covid, the availability of UK distribution warehousing has steadily increased across all UK regions. In Q2 the supply logistics space available to let continued to increase in London but stabilised in the South East and Rest of the UK. In the key Logistics Triangle, availability fell -4.6%.

In a similar yet opposite manner the demand or take-up of all industrial space has been declining since mid-2022. It is likely that this reduction in take-up is not caused by a reduction in demand but by a lack of suitable space in prime locations with the high building specification required by occupiers. There is some quarterly volatility around the trend and in Q2 all industrial take-up rose 4.0%. Lettings of logistics space grew by 6.2% to 17.4 million sf but light industrial take-up fell -22.7% to 869,000 sf possibly reflecting waning small business confidence in the face of higher total occupational costs.

Four lettings of more than 500,000 sf during Q2 illustrate the continuing demand for “Big Box” logistics space. At Magna Park, Lutterworth, specialist fashion and lifestyle logistics provider Bleckmann took the 762,000 sf “MPN 761” facility for a new multi-client distribution operation. In Rugby, ID Logistics took the 673,000 sf former Gap distribution centre at Castle Mound Way, with the facility understood to be operated on behalf of Amazon, providing further evidence of strong demand from third party logistics (3PL) and e-commerce operators. Meanwhile at Infinity Park, Derby, CEVA Logistics committed to Logicor’s newly completed 508,000 sf “Derby 507” warehouse. Lastly, the Ministry of Defence agreed to occupy approximately 525,000 sf at Panattoni Park Swindon, South Marston, reportedly as a testing and evaluation facility for uncrewed systems.

Although annual MRV growth has fallen below the double-digit rates recorded earlier in the cycle, it remains strongly positive. In Q2 year-on-year (y-on-y) MRV growth in London and the South East was 4.3% and 3.8% respectively. Rental value growth in the Big 6 cities averaged 4.3% supported by 6% in Bristol and Edinburgh and 11% in Glasgow, y-on-y.

The amount of logistics space under construction nationally increased by 6.4% to 30.3 million sf in Q2 as construction starts grew by 64.9% to 5.6 million sf. But the amount of space under construction is trending down in the medium term. The amount of space completed in Q2 shrank by 50% to 3.75 million sf. This is 60% below the quarterly average completion rate of 9.48 million sf.

There are 110 Big Box schemes with more than 100,000 sf of space under construction listed but more than half of these are fully pre-let. PLP and Indurent’s 645,000 sf M1 XL at Junction 24 of the M1 is the largest speculative logistics development currently underway in the Golden Triangle. The cross-docked facility, which offers 18m clear height and 5.4 MVA of power, is due to complete in December 2026 and remains available to let. PLP is a specialist UK logistics and industrial property developer and Indurent is one of the UK’s largest owners, developers and operators of industrial and logistics property created in 2024 by Blackstone following its acquisition of St. Modwen Logistics and Industrial REIT. The decision to start construction without a pre-let demonstrates a high degree of confidence in the demand for such large units.

Investment view

• Investment activity remains subdued versus long-run averages as yields soften, capital growth slows and total returns ease across key industrial markets.
• Portfolio transactions continue to dominate investor activity, with large-scale logistics deals providing immediate exposure to quality assets and prime locations.

Industrial yields continue to de-rate / soften. Despite the support of some robust MRV growth, capital growth is slowing and turned negative in Q2 for South East industrials over the 12 months to June. Consequently, overall performance is also sliding. Year-on-year London industrial total returns decreased to 4.4% from 6.1% in Q1. Across the Big 6 regional cities, y-o-y total returns decreased to 6.6% in June from 8.2% in March and 12.5% a year earlier. In the South East y-o-y returns decreased to 4.1% in Q2 from 4.8 % a quarter earlier and 8.9% in Q2 2025. Industrial yields continue to de-rate / softened in Q1 and over the last 12 months.

Industrial investment transactions fell back in Q1 after a strong end to last year. All industrial Investment volumes_² decreased in Q1 by -37% to £819 million in 814 transactions or, £1.675 billion in current value terms, from £1.487 billion (£3.042 billion) in 1,369 transactions in Q4. Preliminary estimates indicate that investment volumes decreased to £961 million (£1.056 billion) in 513 transactions in Q2 compared to the ten-year quarterly average of £1.455 billion (£2.647 billion) and 1,081 transactions.

London once again attracted the largest slice of inward investment in Q1 amounting to £331.4 million in current value terms. A further £633.6 million was targeted across the Rest of the UK including Manchester, Coventry and Bristol.

Portfolio transactions have dominated the investment market in Q2 which has the advantages of providing immediate scale and exposure without the specific risk attached to a single asset purchase.

The Springbox portfolio sale reflects the continued institutional appetite for large, well-let logistics assets. Equites Property Fund, a South African logistics fund, sold its remaining exposure of six UK logistics assets let on long index-linked leases to strong occupiers including DHL, Evri and Puma. The purchaser was ICG Real Estate which paid £200.5 million reflecting a yield of approximately 5.5%. ICG is a FTSE 100-listed global alternative asset manager with (126 billion of AUM. Its ICG Real Estate division invests across property debt and equity, with a focus on European logistics.

Prologis’s £14.3 billion acquisition of SEGRO at a 39% premium to its pre-offer share price ranks as one of the largest corporate real-estate transactions ever undertaken in Europe and among the largest global logistics deals. Prologis will substantially increase its European logistics platform and gain control of an irreplaceable portfolio of urban and big-box assets in prime locations, a strong development pipeline with guaranteed power capacity and potential for data centre development. However, the acquisition remains subject to shareholder, regulatory and court approvals, with completion expected during H1 2027.

^{2 Investment volumes are the quarterly value of investment transactions adjusted for capital growth over the analysis period and provide a measure of transaction activity that is not obscured by changes in value.}

^{The industrial market is segmented between Logistics being 50,000+ sf of warehouse space; smaller Light Industrial units for local distribution, smaller scale manufacturing and repair workshops; and Specialised space for large scale manufacturing, R&D, Cold Storage and data centres. Most of the UK’s stock of industrial space belongs to the logistics segment (65%) whilst 27% is Specialised and 8% Light Industrial.}